Nigeria’s currency, the Naira, has reached a historic low following the recent dollar auction conducted by the central bank, Bloomberg reported on Wednesday. The auction conducted by the central bank saw dollars sold at a naira rate nearly 30 percent weaker than the tightly controlled official market rate. This has fueled speculation of an imminent devaluation, adding to the concerns raised after the inauguration of Nigeria’s new president last month.
The impact of the currency’s depreciation was felt immediately, as the Naira slipped by 0.7 percent – the steepest decline in nearly six months – in official trading on the Nigeria Exchange. It eventually settled at 467.04 naira to a dollar, marking an unprecedented low point in the history of the Nigerian currency.
Nigeria’s dwindling dollar earnings and reserves, coupled with the high demand for foreign currency from industries and importers, have compelled the government to manage supply and demand through multiple exchange rates. However, this system has resulted in a significant portion of the population resorting to the black market, where the Naira is approximately 40 percent weaker than the official rate.
Currency Crisis: World Bank Rings Alarm Bell
Meanwhile, the latest World Bank’s global economic prospects for Sub-Saharan Africa report has said that Nigeria faces several macroeconomic challenges.
The World Bank report said that Nigeria’s economic growth momentum has been hampered by persistent inflation, foreign exchange shortages, and disruptions caused by the recent naira redesign. These factors have impacted the post-pandemic rebound in Nigeria’s non-oil sector, leading to a cooling effect on economic activity earlier this year.
Furthermore, lower energy prices and stagnant oil production have further hindered the growth trajectory. As a result, the World Bank has warned that economic growth is expected to barely exceed population growth, falling short of the necessary pace to make substantial progress in alleviating extreme poverty.
While the challenges facing Nigeria’s economy are significant, they are not unique to the country.
The World Bank’s report underscores the broader regional impact, with subdued recoveries and adverse external economic headwinds affecting other countries in Sub Saharan Africa. These challenges include weakened domestic vulnerabilities, tight global financial conditions, weak global growth, and heightened social unrest in some nations.
The World Bank’s report also provides a global outlook, projecting a deceleration of growth from 3.1 percent in 2022 to 2.1 percent in 2023. This global economic slowdown adds to the already complex landscape for countries like Nigeria as they navigate both domestic and international challenges.
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